Housing Association President Kumova: "To Maintain Growth in Housing Sales by 2025, Mortgage Rates Need to Decrease"
Foreks - Konutder President Ramadan Kumova shared his assessments for 2024 and expectations for 2025 following the announcement of the November 2024 Housing Sale Statistics by TÜİK today.
In Turkey, housing sales in November increased by 63.6% compared to the same month of the previous year, reaching a total of 153,014. While the first half of the year saw a significant stagnation in the sector, the second half began to witness remarkable increases in housing sales, and although there was a 7.3% decline in November compared to October, housing sales in the first 11 months of 2024 rose by 16.4% compared to the same period in 2023.
On the other hand, in the first 11 months of 2024, first-hand sales increased by 24.2% compared to 2023, while second-hand sales rose by 13.0%. However, mortgage sales saw a decrease of 21.3%. The decline in foreign sales continued, with a 35.1% drop in the first 11 months compared to the previous year.
Although housing sales in November decreased compared to October across Turkey, Istanbul experienced a 6.1% increase, with 26,320 units sold. This marks the highest sales figure in the last 23 months for Istanbul.
By the end of 2024, housing sales are expected to exceed 1.4 million units.
There are housing sales occurring in many places and various segments. It is evident that there is an uptick in the sector, particularly in unbranded homes catering to low and middle-income groups, which we believe show significant vitality. We are of the opinion that investors, benefiting from investments in interest rates, stocks, gold, and cryptocurrency, are turning to home purchases in anticipation of rising housing prices.
If there is a decrease in interest rates, this effect will likely spread to the general market. We anticipate a resurgence beginning in the second quarter of 2025. With the November data released today, the upward trend continues, and it is highly probable that the December results will be similar. In this case, it is certain that by the end of 2024, housing sales will exceed 1.4 million units.
For a sustainable housing market, the share of mortgage sales should be at least 50%.
According to TÜİK data, in November, mortgage housing sales across Turkey increased by 315.7% compared to the same month last year, reaching 21,804. The share of mortgage sales in total housing sales was 14.2%.
While mortgage sales have hovered around 14%, producers have introduced their own financing models to facilitate sales. This will create additional burdens for producers who assume the financing load in the future.
For healthy and balanced market conditions to form, it is critical that the ratio of mortgage (financed) sales does not fall below 50%. In the past, mortgage sales ratios had declined to as low as 4%. Although the current level represents a significant increase to 14%, it remains well below the desired level.
While housing prices are increasing nominally, they are decreasing in real terms.
According to the Central Bank of Turkey’s Housing Price Index report for November, there was a nominal increase of 2.8% month-on-month and 29.4% year-on-year; however, compared to inflation, the annual figure indicates a real decrease of 12%.
Construction costs, on the other hand, showed a 39.4% increase in the latest report. Housing prices have lost value in real terms against the CPI and construction costs. This real decline has continued for approximately 11 months since the beginning of 2024. Therefore, from the second half of 2024 onwards, people are becoming aware of the opportunity in housing and are directing their savings towards property.
Additionally, production costs in Istanbul are significantly higher. According to the Construction Materials Index announced by the Istanbul Chamber of Commerce (İTO), there was a nominal increase of 92.4% in November. In the same period, the Istanbul Housing Price Index increased by 26.2%.
The gap between housing needs and production is widening.
Our country needs 700,000 new homes each year, and while production was around 504,000 in 2023, this year-end estimate is expected to be around 482,000. In recent years, the decline in first-hand housing supply has been balanced by the stock of second-hand housing; however, the inventory of second-hand products has decreased over the last three years and will soon fall below levels that can meet the supply shortage in first-hand housing.
If the downward trend in second-hand housing sales continues—unfortunately, the trend appears to be heading that way—within the next two years, the housing supply crisis will gain a sociological dimension and may lead to a housing crisis.
As the first step to resolve this situation, it is imperative to quickly implement measures such as interest rate reductions on housing loans to accelerate first-hand housing sales. Looking at housing sales, first-hand homes account for 30% and second-hand homes for 70%. This imbalanced situation poses a significant obstacle to production. With improvements in credit interest rates, the sales ratio of first-hand homes should reach 50% to generate resources for new productions. This way, the first step in relieving the supply shortage will be addressed, followed by focusing on formulae to reduce the biggest obstacle to housing production: land costs.
Public-private cooperation is essential for housing production for low-income individuals.
There is not enough housing produced for the significant segments of the population, including the middle-income group, lower-middle-income group, and low-income group. When this need is not met, our homeownership rate is rapidly declining.
In the last 16 years, the homeownership rate among low-income individuals has dropped from 61% to 48%. Meanwhile, those unable to buy homes are moving into rental housing. In 2007, 18 out of every 100 low-income individuals were renting; by 2023, this number nearly doubled to 34.7. With these figures, the rental housing market inflation creates a vicious cycle as inflation issues further affect rental prices.
Recently, it has been encouraging that TOKİ has accelerated new tenders to increase production. However, a strategic and planned approach regarding public-private sector collaboration could lead to a more effective resolution to the problem.
If appropriate conditions form, the housing market could become a viable investment avenue again in 2025.
We believe that the anticipated interest rate reductions on housing loans in 2025 will give the market a boost. In the Sectoral Expectation Survey conducted by Konutder, a parallel increase in housing supply is expected according to interest rates. According to the survey, 31.8% of our members indicate that production will increase in the next six months, whereas in the previous survey, this rate was 0%. We consider the improvement in figures from the second half of 2024 as a promising step towards a healthier market; however, it is crucial to emphasize that this positive trend should not be misleading due to its short duration. Therefore, with a decrease in interest rates, there will likely be a relative increase in housing supply in 2025.
Additionally, based on the recent housing sales, the real price decline in housing has somewhat encouraged buyers. There is activity in both prices and sales volume. We anticipate a real increase in prices starting from the second quarter of 2025 within the housing sector. Considering the developments in housing loan interest rates in 2025, housing could become one of the most profitable areas in the investment league.